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05 Apr 2011
$450 million of new rated debt affected
New York, April 05, 2011 -- Moody's Investors Service assigned a B2 Corporate Family Rating
(CFR) to American Rock Salt Company LLC (ARSC), a B2 rating to its
proposed $250 million senior secured Term Loan B due 2017,
and a B3 rating to the proposed $200 million senior secured second
lien notes due 2018. The proceeds of the proposed debt will be
used to refinance ARSC's outstanding debt, repay debt at ARSC's
holding company parent and fund a distribution to the company's
owners. The transaction is expected to close in the second quarter
of 2011. The outlook is stable. The following summarizes
the ratings activity.
American Rock Salt Company LLC
Corporate Family Rating -- B2
Probability of Default -- B2
$250mm Sr sec term loan B due 2017 -- B2 (LGD4, 51%)
$200mm Sr sec second lien notes due 2018 -- B3 (LGD4,
Outlook -- Stable
ARSC's B2 CFR is supported by its strong margins, cost advantages
associated with operating a relatively new mine, historically favorable
meteorological conditions in its markets including "lake effect" snow,
relatively stable (although seasonal) yearly cash flows that are insulated
from economic cycles, modest capex requirements and a diverse customer
base. The ratings are further supported by the rock salt industry's
relatively benign industry competitive dynamics, natural cost advantage
ARSC enjoys over competitors in the markets adjacent to its mining operations
and barriers to entry for new competitors. The ratings also reflect
ARSC's high leverage (approximately 5.8x for FY2010 after
pro forma adjustments for the proposed financing and taking into account
Moody's standard analytical adjustments), and high balance
sheet debt $450 million) relative to the size of the company (less
than $200 million in revenues). In addition, ARSC's
ratings are limited by its business profile, single mine operation
(Hampton Corners Mine), focused product line (rock salt for highway
de-icing), and a geographically narrow market (primarily
western Pennsylvania and upstate New York).
The stable outlook reflects Moody's expectation that ARSC will continue
to experience favorable winter weather patterns in its main markets and
reduce debt with excess cash balances. We see limited upside to
ARSC's CFR due to its current business profile (including risks
associated with operating a single mine), modest size and history
of repeatedly re-levering the company. There could be negative
pressure on the ratings if the company were not able to maintain its sales
volumes and EBITDA to levels that could support its debt service requirements,
or if adequate liquidity is not maintained.
American Rock Salt Company LLC, headquartered in Retsof, New
York, is a producer of highway deicing rock salt. It operates
a single mine (Hampton Corners Mine) in upstate New York and sells its
product primarily to state and local government agencies in the northeastern
US. The firm is a wholly owned subsidiary of American Rock Salt
Holdings LLC, which is closely held by private investors,
including some members of management. The company generated revenues
of $191 million for the twelve months ended December 31,
The principal methodology used in this rating was Global Chemical Industry
rating methodology published in December 2009.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns B2 CFR to American Rock Salt; rates new term loan and notes
250 Greenwich Street
New York, NY 10007
No Related Data.
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